California Escalates Its War on the Marijuana Black Market

California’s marijuana black market has been utterly ignored by lawmakers. They have now decided to enter the drug war and increase penalties for those operating outside the highly-regulated, expensive legal cannabis system.

California’s 2022 fiscal year will see an increase in taxes for legal marijuana cultivation, as well as new penalties against anyone “aiding or abetting any unlicensed dealer.”

A.B. was passed by lawmakers The September lawmakers passed A.B. Gavin Newsom was able to sign the law into law on September 11th. The legislation will go into effect in 2022. California’s recreational marijuana law already allows for civil penalties against marijuana sellers who are not licensed. A.B.1138 could result in civil fines up to $30,000 per violation for anyone who provides assistance to unlicensed dealers. Every day that you continue to do so is considered a violation.

California’s 2016 passage of Proposition 64 allowed for the implementation of regulations regarding recreational marijuana. It has proven to be a huge mess. Two-thirds (or more) of the ballot initiative’s municipalities were allowed to choose whether or not to permit cultivation. In any city that allows dispensaries, the state imposes high excise and cultivation taxes. These taxes increase further with local sales taxes.

Experts estimate that prices and availability problems have led to a significant increase in marijuana sales through unlicensed sellers. This means the state isn’t receiving its fair share of revenue. It is so serious that even the editors of The Guardian have to step in. Los Angeles TimesRecently, it was acknowledged that black markets are fuelled by high prices for goods.

Instead of eliminating these taxes or decreasing them, the state takes a punitive approach. The state wants to be sure it gets its money. The bill was introduced by Assemblywoman Blanca E. Rubio (D–Baldwin Park), but the Assembly analysis of her proposal explains that it was co-sponsored by the United Cannabis Business Association and The United Food and Commercial Western (UFCW) States Council, the union that represents some licensed cannabis industry workers. Many licensed cannabis trade associations and industries have signed support.

“[T]The United Cannabis Business Association has sent a support message to the United Cannabis Association stating that it is necessary to shut down the illicit cannabis market in order for legal operators to see an increase in patients and consumers. This creates jobs and revenue for childcare workers. In order to safeguard children, police used to insist that drug dealers must be shut down in the early days of the war against drugs. A cannabis trade group now says that police must shut down illegal drug dealers to preserve state-funded childcare worker subsidies. It’s still all about the kids, even though there are many supporters for licensed cannabis groups and companies. There is no child welfare organization.

Many human rights groups opposed the bill, including Action California of the American Civil Liberties Union (ACLU), and the Drug Policy Alliance. They are fully aware of what is going to happen if this bill becomes law.

“A.B. 1138 adds unnecessary criminal and civil penalties to existing ones and causes harm to low-income and wage-earning workers. “The bill exposes employees without equity to the business to severe civil penalties, possibly higher than those that apply to the owners,” warns the ACLU in a State Senate analysis. These individuals could be subject to suspension of their driver’s licence, imprisonment, prison, wage garnishment, or arrest if they don’t pay the fine. The same prosecutor could also bring civil charges for criminal offenses. Low-income people might face jail or heavy fines. To avoid being liable for large fines and other unpaid debt, they may be forced to plead unjustly.

“In addition, the bill would permit the proceeds from enforcement efforts to remain by the prosecuting entities instead of being deposited into The General Fund. This could lead to unfair enforcement efforts in certain communities or prosecution units that are solely aimed at generating cannabis fine revenue.”

This bill also has a Section 230 side. Sites and platforms are generally protected from liability under Section 230 of Communications Decency Act. This applies to content that is posted by third parties even though they may be unlicensed sellers posting cannabis advertisements. Representatives of cannabis businesses have called for California to ban illegal marijuana sales online.

Weedmaps is an online platform that allows vendors to sell marijuana in California. This was a major target. It used to be home to more than 5,600 sellers from whom consumers could purchase marijuana. California only has about 1200 licensed vendors. This meant that thousands of the listings came from unlicensed sellers. Weedmaps agreed to eliminate unlicensed sellers at the start 2020, despite pressure. Unlicensed sellers seem to have been able to circumvent restrictions by self-publishing platforms, even though many are now gone.

UFCW has made it clear that they would like the state to focus on online platforms in order to enforce A.B. 1138: This bill will prohibit illegal and unlicensed marijuana operators from advertising on any internet site, online service or mobile app.

However, the Assembly has done an internal analysis and found that it might not be the case as the bill’s backers believe. Analysis shows that Kamala Harris, California’s attorney-general in 2016, tried to take down Backpage for posting sex trafficking advertisements. However, Section 230 protected the site. Congress deliberately removed those protections when H.R. SESTA-FOSTA is also known as H.R. 1865. SESTA–FOSTA might make it easier for federal agents to pursue site operators who host sex trafficking. However, the bill doesn’t mention drug or drug-dealing. According to the analysis, “federal law continues to be a significant impediment in enforcement against cannabis business advertisers.”

Although the state won’t likely be able pursue web platforms to satisfy licensed dealers or the unions, they will continue to resist the state (who would like the tax revenue directed towards unionized state employees and as such the state is unlikely to have the ability to take them down). PoliticoThey have also resisted any attempts to decrease taxes, as noted. Organizations like the ACLU or Drug Policy Alliance raise alarm bells because of this. This will make it more difficult for the state to demonstrate that they are doing anything to crack down on unlicensed dealers. It won’t be easy to reach targets without Section 230 protections. A.B. 1138 won’t end California’s marijuana black market. The new drug war will be waged in accordance with the industry and union mandates.